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| **The New Industrial State, John Kenneth Galbraith, 1972 (2nd ed), Harmondsworth: Penguin** | The New Industrial State, John Kenneth Galbraith, 1972 (2nd ed), Harmondsworth: Penguin |
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| ====== Part I: The History and Nature of the New Industrial State ====== | ====== Part I: The History and Nature of the New Industrial State ====== |
| The increasing application of sophisticated technology to production is perhaps the most obvious change. The corporation used to be very much the instrument of its owners, now it is under professional and much less identifiable management. The federal and state governments are now much more active participants in the economy, together accounting for 23 per cent of production (1969). The state is perceived to be responsible for maintaining aggregate demand within the economy at a high enough level to ensure minimal unemployment through Keynesian measures. Before World War II, serious recession was seen as a normal part of the business cycle; since the war there have been only two years in which output failed to expand. | The increasing application of sophisticated technology to production is perhaps the most obvious change. The corporation used to be very much the instrument of its owners, now it is under professional and much less identifiable management. The federal and state governments are now much more active participants in the economy, together accounting for 23 per cent of production (1969). The state is perceived to be responsible for maintaining aggregate demand within the economy at a high enough level to ensure minimal unemployment through Keynesian measures. Before World War II, serious recession was seen as a normal part of the business cycle; since the war there have been only two years in which output failed to expand. |
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| Less frequently celebrated, there has been a vast increase in the human effort expended in advertising. "In its cost and the talent it commands, this activity is coming increasingly to rival the effort devoted to the production of goods."[1] Union membership is no longer increasing, having peaked at 25.2 per cent of the workforce in 1956 and having declined since. There has been a large increase in enrolment in higher education, and a somewhat lagging increase in funding. | Less frequently celebrated, there has been a vast increase in the human effort expended in advertising. "In its cost and the talent it commands, this activity is coming increasingly to rival the effort devoted to the production of goods."((p23.)) Union membership is no longer increasing, having peaked at 25.2 per cent of the workforce in 1956 and having declined since. There has been a large increase in enrolment in higher education, and a somewhat lagging increase in funding. |
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| These changes should be seen holistically. In sum, they create the need and the opportunity for large industrial organisation. Economic systems tend to converge on the large, bureaucratic industrial system. There shape is thus more determined by technology and organisation than by ideology. | These changes should be seen holistically. In sum, they create the need and the opportunity for large industrial organisation. Economic systems tend to converge on the large, bureaucratic industrial system. There shape is thus more determined by technology and organisation than by ideology. |
| There is still a myth amongst economists that the increasing concentration of large firms within the economy is an attempt to seize industrial power -- use monopoly power to increase prices. It is not recognised that large corporations are the only unit of organisation capable to manage planning on a scale appropriate to contemporary high-technology ventures. A world without large corporations would be a world without technologically advanced products. | There is still a myth amongst economists that the increasing concentration of large firms within the economy is an attempt to seize industrial power -- use monopoly power to increase prices. It is not recognised that large corporations are the only unit of organisation capable to manage planning on a scale appropriate to contemporary high-technology ventures. A world without large corporations would be a world without technologically advanced products. |
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| Secondly, "the enemy of the market is not ideology but the engineer."[2] Advanced technology and specialisation are leading to increased bureaucratic planning in both the Western and Soviet worlds. This is not the result of ideology, but is made necessary by the requirements of the technology we are coming to take for granted. | Secondly, "the enemy of the market is not ideology but the engineer."((p51.)) Advanced technology and specialisation are leading to increased bureaucratic planning in both the Western and Soviet worlds. This is not the result of ideology, but is made necessary by the requirements of the technology we are coming to take for granted. |
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| ===== Planning and the Supply of Capital ===== | ===== Planning and the Supply of Capital ===== |
| There have been two broad shifts in power between factors in history. Prior to the industrial revolution, and during the period in which Smith and Ricardo were writing, power was unquestionably held by landowners. Malthus and Ricardo were convinced that labour would regulate its own abundance such that it would always be available at more or less a subsistence wage -- it was never conceivable that labour might have any power. Entrepreneurship was of no use -- one might even say that it had not been invented yet. And capital was of little importance -- those who had land were invariably capable of commanding the minute capital that was required to work it efficiently, and capital alone was of little productive use to anybody without land. The market for land was informally controlled by a landed class who rarely traded land, preferring to pass their estates intact to their heirs. In 1800, the governments of Britain and America were dominated by the landed gentry. The modern meaning of 'democracy' initially indicated a government controlled by landed men, as the landless could not vote until later. | There have been two broad shifts in power between factors in history. Prior to the industrial revolution, and during the period in which Smith and Ricardo were writing, power was unquestionably held by landowners. Malthus and Ricardo were convinced that labour would regulate its own abundance such that it would always be available at more or less a subsistence wage -- it was never conceivable that labour might have any power. Entrepreneurship was of no use -- one might even say that it had not been invented yet. And capital was of little importance -- those who had land were invariably capable of commanding the minute capital that was required to work it efficiently, and capital alone was of little productive use to anybody without land. The market for land was informally controlled by a landed class who rarely traded land, preferring to pass their estates intact to their heirs. In 1800, the governments of Britain and America were dominated by the landed gentry. The modern meaning of 'democracy' initially indicated a government controlled by landed men, as the landless could not vote until later. |
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| This changed in the course of the nineteenth century, in the Anglo-Saxon world at least. The scarcity of land was finally being broken by the new cultivation of America, Canada, South Africa and Australia. Moreover, the industrial sector was growing in importance -- it was becoming possible to create economic organisation with capital, labour, the new invention of entrepreneurship and only the tiniest amount of labour. Anybody with money could buy land. Power was shifting from land to capital as capital became the economic "factor [that was] hardest to obtain or replace."[3] By the 1840s, capital was so represented in the British parliament that the Corn Laws were repealed, confiscating a guaranteed income to landowners and lowering industrial (subsistence) wages by driving down the cost of living. By 1900, the British and American governments were dominated by industrialists and businessmen. | This changed in the course of the nineteenth century, in the Anglo-Saxon world at least. The scarcity of land was finally being broken by the new cultivation of America, Canada, South Africa and Australia. Moreover, the industrial sector was growing in importance -- it was becoming possible to create economic organisation with capital, labour, the new invention of entrepreneurship and only the tiniest amount of labour. Anybody with money could buy land. Power was shifting from land to capital as capital became the economic "factor [that was] hardest to obtain or replace."((p71.)) By the 1840s, capital was so represented in the British parliament that the Corn Laws were repealed, confiscating a guaranteed income to landowners and lowering industrial (subsistence) wages by driving down the cost of living. By 1900, the British and American governments were dominated by industrialists and businessmen. |
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| The second shift in power has been occurring over last fifty years (to 1970) and is not yet finished. Nevertheless it has not yet been recognised. This is not particularly surprising, as the reign of capital, just like the reign of land before it, is seen as eternal. Ricardo believed that the process of improving technology would increase the rent of land indefinitely, that all other factors would remain in the same miserable condition forever. However, corporations are no longer influenced by their stockholders, they are able to find funds sufficient from their needs in retained earnings. The following are symptoms: | The second shift in power has been occurring over last fifty years (to 1970) and is not yet finished. Nevertheless it has not yet been recognised. This is not particularly surprising, as the reign of capital, just like the reign of land before it, is seen as eternal. Ricardo believed that the process of improving technology would increase the rent of land indefinitely, that all other factors would remain in the same miserable condition forever. However, corporations are no longer influenced by their stockholders, they are able to find funds sufficient from their needs in retained earnings. The following are symptoms: |
| >> the loss of power by stockholders in the modern corporation, the impregnable position of the successful corporate management, the dwindling social magnetism of the banker, the air of quaintness that attaches itself to the suggestion that the United States is run by Wall Street, the increasingly energetic search for industrial talent, the new prestige of education and educators... --p73 | >> the loss of power by stockholders in the modern corporation, the impregnable position of the successful corporate management, the dwindling social magnetism of the banker, the air of quaintness that attaches itself to the suggestion that the United States is run by Wall Street, the increasingly energetic search for industrial talent, the new prestige of education and educators... --p73 |
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| In the industrial state, the scarcest factor of production is "the association of men of diverse technical knowledge, experience or other talent which modern industrial technology and planning require."[4] This is not the same as labour. Labour has won some power over its pay and working conditions but none over the enterprise, and it still tends to be in abundance. When insufficient savings are invested and aggregate demand dips below production, unemployment is the result. When savings are used, one consequence is automation and the replacement of workers with no or standard skills with machines. Thus labour and capital suffer from the new abundance of capital. Nor is this new factor the same thing as entrepreneurship, which is of little and diminishing value within the industrial system. It is a genuinely new factor of production, and it already holds unrivalled power within the industrial society. | In the industrial state, the scarcest factor of production is "the association of men of diverse technical knowledge, experience or other talent which modern industrial technology and planning require."((p74.)) This is not the same as labour. Labour has won some power over its pay and working conditions but none over the enterprise, and it still tends to be in abundance. When insufficient savings are invested and aggregate demand dips below production, unemployment is the result. When savings are used, one consequence is automation and the replacement of workers with no or standard skills with machines. Thus labour and capital suffer from the new abundance of capital. Nor is this new factor the same thing as entrepreneurship, which is of little and diminishing value within the industrial system. It is a genuinely new factor of production, and it already holds unrivalled power within the industrial society. |
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| ===== The Technostructure ===== | ===== The Technostructure ===== |
| Individualism is still highly glorified within our culture, but within the industrial system, the decisive unit of decision-making is the group, specifically the committee. There are three main reasons for this. | Individualism is still highly glorified within our culture, but within the industrial system, the decisive unit of decision-making is the group, specifically the committee. There are three main reasons for this. |
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| Firstly, the technology involved in corporate decision-making requires information to be provided and interpreted by specialists in various different fields merely for a single decision to be made. Although in almost all cases it would be possible for an exceptionally capable individual to gain simultaneous specialist knowledge in multiple diverse fields in order to be capable of making such a decision without relying on further experts, this is an inefficient use of expertise and talent, the scarcest resource in modern business. Better to assemble a group of separate experts of ordinary talent. The results will be more predictable. "The real accomplishment of science and technology consists in taking ordinary men, informing them narrowly and deeply and then, through appropriate organisation, arranging to have their knowledge combined with that of other specialised but equally ordinary men."[5] | Firstly, the technology involved in corporate decision-making requires information to be provided and interpreted by specialists in various different fields merely for a single decision to be made. Although in almost all cases it would be possible for an exceptionally capable individual to gain simultaneous specialist knowledge in multiple diverse fields in order to be capable of making such a decision without relying on further experts, this is an inefficient use of expertise and talent, the scarcest resource in modern business. Better to assemble a group of separate experts of ordinary talent. The results will be more predictable. "The real accomplishment of science and technology consists in taking ordinary men, informing them narrowly and deeply and then, through appropriate organisation, arranging to have their knowledge combined with that of other specialised but equally ordinary men."((p77.)) |
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| Secondly, the degree of planning required to organise even modest tasks within the industrial system requires an amount of work which cannot be completed by an individual. The replacement of the free market with a planned solution puts action and decision-making beyond the reach of individuals. | Secondly, the degree of planning required to organise even modest tasks within the industrial system requires an amount of work which cannot be completed by an individual. The replacement of the free market with a planned solution puts action and decision-making beyond the reach of individuals. |
| The most obvious requirement of planning is size. This is not properly understood. Economists have suggested that corporations are large because of technical economies of scale or because of a desire to use market power to inflate prices. Both are partial answers. Technology dictates large size but does not explain wide diversification. Planning in a sense requires market power, but it is the power to control supply that is often inadequately provided by the market, the stabilisation of demand, provision of capital and the general minimisation of risk. The larger the corporation, the easier this planning becomes. | The most obvious requirement of planning is size. This is not properly understood. Economists have suggested that corporations are large because of technical economies of scale or because of a desire to use market power to inflate prices. Both are partial answers. Technology dictates large size but does not explain wide diversification. Planning in a sense requires market power, but it is the power to control supply that is often inadequately provided by the market, the stabilisation of demand, provision of capital and the general minimisation of risk. The larger the corporation, the easier this planning becomes. |
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| The corporation has come efficiently to protect the technostructure by preventing interference in its decisions. The idea of state interference is taboo. Although the influence of stockholders is maintained in myth, it is now almost impossible for stockholders to impose its will on management in even the most extreme cases: stock is too diversely held, there are various sundry impediments to stockholders attempts to intervene, and most importantly, the knowledge required to appraise the firm's activities or make useful judgements about its operations is impossible to obtain, the company's operations being too complex. The influence of capitalists is lessened by the abundance of capital, enabling large firms to obtain finance without losing any control; it is enhanced by the complexity and opacity of operations which make it impossible for financiers to understand enough to add conditions to finance; but it is generally removed entirely by financing the majority of new investment with retained profits. The only circumstances under which the autonomy of the technostructure is threatened is a failure of earnings. The obvious solution being, of course, that the mature corporation almost never fails to turn a profit. "From 1954 to 1969, there was only one year in which as many as three of the hundred largest industrial corporations lost money."[6] | The corporation has come efficiently to protect the technostructure by preventing interference in its decisions. The idea of state interference is taboo. Although the influence of stockholders is maintained in myth, it is now almost impossible for stockholders to impose its will on management in even the most extreme cases: stock is too diversely held, there are various sundry impediments to stockholders attempts to intervene, and most importantly, the knowledge required to appraise the firm's activities or make useful judgements about its operations is impossible to obtain, the company's operations being too complex. The influence of capitalists is lessened by the abundance of capital, enabling large firms to obtain finance without losing any control; it is enhanced by the complexity and opacity of operations which make it impossible for financiers to understand enough to add conditions to finance; but it is generally removed entirely by financing the majority of new investment with retained profits. The only circumstances under which the autonomy of the technostructure is threatened is a failure of earnings. The obvious solution being, of course, that the mature corporation almost never fails to turn a profit. "From 1954 to 1969, there was only one year in which as many as three of the hundred largest industrial corporations lost money."((p96.)) |
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| ===== The Entrepreneur and the Technostructure ===== | ===== The Entrepreneur and the Technostructure ===== |
| Elsewhere, in particular in the former British and French colonies, socialistic policies were implemented rather differently, with government maintaining much tighter control of nationalised firms. The results have been far less successful. One particular tendency in India is for parliament to pressure firms for lower prices and higher wages. Nationalised firms in India and Ceylon almost invariably operate at a loss and, significantly, are not able to accumulate earnings to be used in investment -- the principle means by which the Indian economy is likely to grow. The technostructure would surely make different decisions if allowed greater autonomy. | Elsewhere, in particular in the former British and French colonies, socialistic policies were implemented rather differently, with government maintaining much tighter control of nationalised firms. The results have been far less successful. One particular tendency in India is for parliament to pressure firms for lower prices and higher wages. Nationalised firms in India and Ceylon almost invariably operate at a loss and, significantly, are not able to accumulate earnings to be used in investment -- the principle means by which the Indian economy is likely to grow. The technostructure would surely make different decisions if allowed greater autonomy. |
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| Democratic socialism in the industrial system is now as impossible, on technical grounds, as entrepreneurial capitalism. However there is "more to the case for the autonomous public corporation than the modern socialist now sees. Public ownership increases the amenability of the firm to social goals."[7] | Democratic socialism in the industrial system is now as impossible, on technical grounds, as entrepreneurial capitalism. However there is "more to the case for the autonomous public corporation than the modern socialist now sees. Public ownership increases the amenability of the firm to social goals."((p116.)) |
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| ===== The Approved Contradiction ===== | ===== The Approved Contradiction ===== |
| The interaction of these goals is clearly of interest, and some reasonably strong observations can be made. Compulsion and compensation are usually found together. The amount of compensation usually rises as the level of compulsion falls. There is also a typical relationship between the balance between these two and (a) the wealth of society and (b) the economic position of the individual involved. Poor individuals in poor countries typically face extreme hardship on losing employment. Their pay is correspondingly small. The richer the country, the better unemployment compensation and welfare is provided to lessen the compulsion to avoid unemployment. The wealthier the individual, the better the prospects for finding another job. | The interaction of these goals is clearly of interest, and some reasonably strong observations can be made. Compulsion and compensation are usually found together. The amount of compensation usually rises as the level of compulsion falls. There is also a typical relationship between the balance between these two and (a) the wealth of society and (b) the economic position of the individual involved. Poor individuals in poor countries typically face extreme hardship on losing employment. Their pay is correspondingly small. The richer the country, the better unemployment compensation and welfare is provided to lessen the compulsion to avoid unemployment. The wealthier the individual, the better the prospects for finding another job. |
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| There is an interesting association with slavery. In a very poor society, the difference between serfdom, wage labour and slavery may be slight. "The choice between hunger and flogging may be a matter of taste."[8] As an economy develops, and the condition of wage labour improves the motivation of slaves to escape will grow and the costs of associated with maintaining slaves will increase. Thus there will be a level of economic development at which the maintenance of slavery ceases to be economically viable. Naturally, at this point the society will congratulate itself on its newfound civilisation: | There is an interesting association with slavery. In a very poor society, the difference between serfdom, wage labour and slavery may be slight. "The choice between hunger and flogging may be a matter of taste."((p144.)) As an economy develops, and the condition of wage labour improves the motivation of slaves to escape will grow and the costs of associated with maintaining slaves will increase. Thus there will be a level of economic development at which the maintenance of slavery ceases to be economically viable. Naturally, at this point the society will congratulate itself on its newfound civilisation: |
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| >> In the absence of the Civil War, slavery in the United States could have lasted only a few more years...As in other countries, at a similar stage in their economic development, slavery would have been given up. The reform would have been attributed to the innate humanity of man to man. By 1880 or 1890 at the latest, the more respected philosophers would have been congratulating the nation on having accomplished peacefully what men once feared could only have been done by war. --p145-6 | >> In the absence of the Civil War, slavery in the United States could have lasted only a few more years...As in other countries, at a similar stage in their economic development, slavery would have been given up. The reform would have been attributed to the innate humanity of man to man. By 1880 or 1890 at the latest, the more respected philosophers would have been congratulating the nation on having accomplished peacefully what men once feared could only have been done by war. --p145-6 |
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| Similarly, with the transition of power from capital to the technostructure, the primary motivational force has shifted from compensation to the combination of identification and adaptation. Considering that the reverence for the value of compulsion has not yet died, the task of convincing economists that compensation has given way to new motives within a substantial part of the economy will not be easy. Yet, within the technostructure, this has already happened to a striking and decisive degree. | Similarly, with the transition of power from capital to the technostructure, the primary motivational force has shifted from compensation to the combination of identification and adaptation. Considering that the reverence for the value of compulsion has not yet died, the task of convincing economists that compensation has given way to new motives within a substantial part of the economy will not be easy. Yet, within the technostructure, this has already happened to a striking and decisive degree. |
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| ===== Motivation and the Technostructure ===== | ===== Motivation and the Technostructure ===== |
| The traditional view of the power hierarchy within a corporation runs something like that depicted in Figure 1. | The traditional view of the power hierarchy within a corporation runs something like that depicted in Figure 1. |
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| [pic] | {{ nis_traditional_hierarchy.png |Traditional View of the Corporate Hierarchy}} |
| Figure 1: Traditional view of Corporate Hierarchy | Figure 1: Traditional view of Corporate Hierarchy |
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| Power is supposed to stem from shareholders through the board of directors. But power no longer lies with anonymous shareholders or in a board of directors that is now largely subservient to senior management. Instead, the bulk of decisions stem from groups within the technostructure. We might alternatively depict the corporation as shown in Figure 2. Rather than illustrate the supposed flow of power, this separates participants by their level of commitment to and investment in the corporation. There is a clear association between these and the varying motivations for involvement with the corporation. On the periphery are shareholders, whose interests are purely pecuniary and who would generally move their capital to another corporation instantly if they supposed that it would earn a better return. The next circle represents production workers, whose motivation varies by corporation. In those in which work is monotonous and uninteresting, in which the corporate ethos appears to value profit above all else, which enjoys little respect within the community and in which layoffs are common, production workers are likely to be motivated primarily by compensation. In corporations in which work is more skilled, varied and interesting, which perhaps have a more social role in society, which enjoy the respect of the community and which have a proven commitment to the job security of all their staff, it is likely that part of the production worker's motivation will come from identification with the firm. It is highly unlikely that he will have any illusion that he can influence the firm, so adaptation is an unlikely motivator. However, for those employees in the central core, identification and to an increasing extent adaptation are likely to dominate compensation as motivators. | Power is supposed to stem from shareholders through the board of directors. But power no longer lies with anonymous shareholders or in a board of directors that is now largely subservient to senior management. Instead, the bulk of decisions stem from groups within the technostructure. We might alternatively depict the corporation as shown in Figure 2. Rather than illustrate the supposed flow of power, this separates participants by their level of commitment to and investment in the corporation. There is a clear association between these and the varying motivations for involvement with the corporation. On the periphery are shareholders, whose interests are purely pecuniary and who would generally move their capital to another corporation instantly if they supposed that it would earn a better return. The next circle represents production workers, whose motivation varies by corporation. In those in which work is monotonous and uninteresting, in which the corporate ethos appears to value profit above all else, which enjoys little respect within the community and in which layoffs are common, production workers are likely to be motivated primarily by compensation. In corporations in which work is more skilled, varied and interesting, which perhaps have a more social role in society, which enjoy the respect of the community and which have a proven commitment to the job security of all their staff, it is likely that part of the production worker's motivation will come from identification with the firm. It is highly unlikely that he will have any illusion that he can influence the firm, so adaptation is an unlikely motivator. However, for those employees in the central core, identification and to an increasing extent adaptation are likely to dominate compensation as motivators. |
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| [pic] | {{ nis_motivational_breakdown.png |Suggested Diagram of Motivational Division within the Corporation}} |
| Figure 2: Suggested diagram of motivational division within the corporation | Figure 2: Suggested diagram of motivational division within the corporation |
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| Professors Simon and March suggest the following circumstances which induce identification of the individual with his organisation:[9] | Professors Simon and March suggest the following circumstances which induce identification of the individual with his organisation:((James March and Herbert Simon, 1958, "Organisations", Chichester: Wiley)) |
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| - Primarily, obviously, he believes that the organisation shares his goals, | - Primarily, obviously, he believes that the organisation shares his goals, |
| - Competition between members of the organisation is minimised. | - Competition between members of the organisation is minimised. |
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| "All of these requirements are met in the large corporation, and increasingly so in the inner circles of the technostructure."[10] The power of adaptation as a motivating force is greatly enhanced by the human instinct to parochialism -- to perceiving the sub-universe of the organisation in which his life exists as the only realm of any importance in the world. | "All of these requirements are met in the large corporation, and increasingly so in the inner circles of the technostructure."((p162.)) The power of adaptation as a motivating force is greatly enhanced by the human instinct to parochialism -- to perceiving the sub-universe of the organisation in which his life exists as the only realm of any importance in the world. |
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| ===== The Principle of Consistency ===== | ===== The Principle of Consistency ===== |
| - Interference from stockholders -- struggles for control of corporations are observed only when suffering losses or meagre earnings, and | - Interference from stockholders -- struggles for control of corporations are observed only when suffering losses or meagre earnings, and |
| - In the absence of insufficient retained profits, the need to appeal to outside sources of investment capital invites disagreeable scrutiny of the technostructure's activities. | - In the absence of insufficient retained profits, the need to appeal to outside sources of investment capital invites disagreeable scrutiny of the technostructure's activities. |
| - The secondary goal of the technostructure is growth, measured in sales volumes. This, two, is an act of self-preservation on the part of the technostructure. A contraction in sales volumes in the mature corporation threatens the secure tenure of members of the technostructure. Even those not immediately vulnerable to unemployment will be far more adverse to seeing member of the technostructure made unemployed than they would be of blue collar workers. Decisions to make people redundant must be made within the technostructure itself, and "do not have the agreeable impersonality which is associated with firing someone at a greater distance, or of a different social class."[11] The main defence mechanism against contraction is a modest expansion -- thus sales growth represents a solid survival strategy for members of the technostructure. Moreover, growth represents a key means of maximising pecuniary return for members of the technostructure. An expansion of the technostructure within the corporation provides more opportunities for promotion and usually greater remuneration, and those employees responsible for the growth are likely to be the favoured candidates. Sales growth, far more than dividend growth, is in the personal financial interest of the technostructure. | - The secondary goal of the technostructure is growth, measured in sales volumes. This, two, is an act of self-preservation on the part of the technostructure. A contraction in sales volumes in the mature corporation threatens the secure tenure of members of the technostructure. Even those not immediately vulnerable to unemployment will be far more adverse to seeing member of the technostructure made unemployed than they would be of blue collar workers. Decisions to make people redundant must be made within the technostructure itself, and "do not have the agreeable impersonality which is associated with firing someone at a greater distance, or of a different social class."((p180.)) The main defence mechanism against contraction is a modest expansion -- thus sales growth represents a solid survival strategy for members of the technostructure. Moreover, growth represents a key means of maximising pecuniary return for members of the technostructure. An expansion of the technostructure within the corporation provides more opportunities for promotion and usually greater remuneration, and those employees responsible for the growth are likely to be the favoured candidates. Sales growth, far more than dividend growth, is in the personal financial interest of the technostructure. |
| - No further goals can be allowed to interfere with the first two, but if both of the first two goals are met, then further aims are possible. The third is likely to be technical virtuosity. This is often appreciated by members of the technostructure in its own right. It also reinforces the position of the technostructure -- the technostructure came to power on the back of technological complexity, and ever-expanding technological complexity assures the corporation's ever-increasing dependence on the technostructure. However, serious research and development is often risky, and a goal such as technical virtuosity cannot possibly be allowed to conflict with the primary goal of securing a minimum income. Consequently, the cost and risk of technological development is passed off to the state. | - No further goals can be allowed to interfere with the first two, but if both of the first two goals are met, then further aims are possible. The third is likely to be technical virtuosity. This is often appreciated by members of the technostructure in its own right. It also reinforces the position of the technostructure -- the technostructure came to power on the back of technological complexity, and ever-expanding technological complexity assures the corporation's ever-increasing dependence on the technostructure. However, serious research and development is often risky, and a goal such as technical virtuosity cannot possibly be allowed to conflict with the primary goal of securing a minimum income. Consequently, the cost and risk of technological development is passed off to the state. |
| - Of similar importance to (3), and with a conscious concession to economic orthodoxy, an increase in the rate of dividends is clearly amongst the corporation's goals. However, it is clear that this goal must not be allowed to interfere with (2). "Nothing better suggests the primacy of growth to profit than the vehemence with which the sacrifice f growth to profit would be condemned as unsound business practice."[12] | - Of similar importance to (3), and with a conscious concession to economic orthodoxy, an increase in the rate of dividends is clearly amongst the corporation's goals. However, it is clear that this goal must not be allowed to interfere with (2). "Nothing better suggests the primacy of growth to profit than the vehemence with which the sacrifice f growth to profit would be condemned as unsound business practice."((p183.)) |
| - If all of the above four can be achieved, then there will be space for the corporation to pursue any number of more whimsical goals to which it may be attracted: | - If all of the above four can be achieved, then there will be space for the corporation to pursue any number of more whimsical goals to which it may be attracted: |
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| >> The grounds on which this autonomy is defended are palpably bogus. It is held that nothing must interfere with the independent operation of the market mechanism to which the firm is subject. The reality of the case of the mature corporation, as we have sufficiently seen, is that prices are substantially controlled by the firm and the latter goes on to exercise influence on the amounts that are purchased and sold at these prices. --p178 | >> The grounds on which this autonomy is defended are palpably bogus. It is held that nothing must interfere with the independent operation of the market mechanism to which the firm is subject. The reality of the case of the mature corporation, as we have sufficiently seen, is that prices are substantially controlled by the firm and the latter goes on to exercise influence on the amounts that are purchased and sold at these prices. --p178 |
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| The growth of the corporation is in accord with the central importance of growth in GNP to society, which is agreed without question to be the primary goal of society throughout the world, including the Soviet world and the ancient civilisations of China, India and Persia, although this is partly due to anachronistic reverence for increased production. Technical progress is similarly coveted: "One would encounter less dispute, on the whole, by questioning the sanctity of the family or religion than the absolute merit of technical progress."[13] Luckily, this predisposes the state to generously support the more risky and expensive areas of research and development that would threaten the firm's survival if attempted in the private sector. Profitability, and offering an increasing return to the shareholder is similarly held in high esteem by society. The member of the technostructure can therefore feel fuzzy in the knowledge that his service to his corporation ultimately serves the highest aims of society, remaining conveniently less aware of the extent to which these aims are shaped, in turn, by the personal needs of the technostructure. | The growth of the corporation is in accord with the central importance of growth in GNP to society, which is agreed without question to be the primary goal of society throughout the world, including the Soviet world and the ancient civilisations of China, India and Persia, although this is partly due to anachronistic reverence for increased production. Technical progress is similarly coveted: "One would encounter less dispute, on the whole, by questioning the sanctity of the family or religion than the absolute merit of technical progress."((p183.)) Luckily, this predisposes the state to generously support the more risky and expensive areas of research and development that would threaten the firm's survival if attempted in the private sector. Profitability, and offering an increasing return to the shareholder is similarly held in high esteem by society. The member of the technostructure can therefore feel fuzzy in the knowledge that his service to his corporation ultimately serves the highest aims of society, remaining conveniently less aware of the extent to which these aims are shaped, in turn, by the personal needs of the technostructure. |
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| ===== Prices in the Industrial System ===== | ===== Prices in the Industrial System ===== |
| There is a stark contradiction between the standard analysis of the dominant market structure of the industrial system and the reality, both in terms of its treatment by public policy and its achievements. | There is a stark contradiction between the standard analysis of the dominant market structure of the industrial system and the reality, both in terms of its treatment by public policy and its achievements. |
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| Economic orthodoxy has long viewed monopoly as an evil. Monopolies overcharge and underproduce. In so doing they rob the consumer and distort the proper allocation of resources by sending away capital and labour which could more effectively be used in raising their output. Economic theory, in turn, views oligopoly as little more than an imperfect form of monopoly, in which each of its ills is present in somewhat diluted form. Prices are still excessive, output is still restrained -- although there are additional inefficiencies. Prices under oligopoly are also artificially stable, firms are unwilling to raise prices for fear that the other dominant firms won't follow suit and unwilling to lower prices for fear that other firms will follow. Thus prices remain at a stable level, even when efficiency requires that they be changed to adapt to changing conditions (costs and preferences). Moreover, the dangers in using price competition lead firms to rely more than ever on 'unproductive' forms of competition: the oligopolist "remodels, repackages and, on occasion, seeks to improve his product in order to entice customers from his rivals."[14] In particular, saturation advertising is typical of oligopoly markets -- a quintessentially unproductive form of competition. A monopolist would not so waste resources. | Economic orthodoxy has long viewed monopoly as an evil. Monopolies overcharge and underproduce. In so doing they rob the consumer and distort the proper allocation of resources by sending away capital and labour which could more effectively be used in raising their output. Economic theory, in turn, views oligopoly as little more than an imperfect form of monopoly, in which each of its ills is present in somewhat diluted form. Prices are still excessive, output is still restrained -- although there are additional inefficiencies. Prices under oligopoly are also artificially stable, firms are unwilling to raise prices for fear that the other dominant firms won't follow suit and unwilling to lower prices for fear that other firms will follow. Thus prices remain at a stable level, even when efficiency requires that they be changed to adapt to changing conditions (costs and preferences). Moreover, the dangers in using price competition lead firms to rely more than ever on 'unproductive' forms of competition: the oligopolist "remodels, repackages and, on occasion, seeks to improve his product in order to entice customers from his rivals."((p187.)) In particular, saturation advertising is typical of oligopoly markets -- a quintessentially unproductive form of competition. A monopolist would not so waste resources. |
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| Yet oligopoly is the staple market formation of the industrial system. "Markets for primary aluminium, copper, rubber, cigarettes, soap and detergents, whisky, glass, refrigerators, cellulose fibres, photographic equipment, cans, computers, sugar, [automobiles] and numerous other items are each dominated by four firms."[15] So here is the contradiction: microeconomists denounce oligopoly as inefficient and wasteful; macroeconomists gush praise for the industrial system's unstoppable progress and ever-increasing efficiency. The management of prices is denounced as an unforgivable attempt to subordinate the market, and yet the technology which is the engine of improvements in efficiency relies absolutely on that management. | Yet oligopoly is the staple market formation of the industrial system. "Markets for primary aluminium, copper, rubber, cigarettes, soap and detergents, whisky, glass, refrigerators, cellulose fibres, photographic equipment, cans, computers, sugar, [automobiles] and numerous other items are each dominated by four firms."((p186-7; in each case the largest four firms had at least 60 per cent of the market in 1963.)) So here is the contradiction: microeconomists denounce oligopoly as inefficient and wasteful; macroeconomists gush praise for the industrial system's unstoppable progress and ever-increasing efficiency. The management of prices is denounced as an unforgivable attempt to subordinate the market, and yet the technology which is the engine of improvements in efficiency relies absolutely on that management. |
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| There is an equal contradiction in the present antitrust law. It forbids combination by merger and explicit collusion in price-fixing. It permits large firms to continue to dominate their markets and to increase in size through investment and growth in sales, and implicit collusion in price-fixing. A firm may grow to have a fifty per cent share in its market, but two firms may not combine to form fifteen per cent. In most cases explicit collusion could not make price-fixing any more effective or binding. In these markets it is practised with immunity. In a few, particularly markets for big-ticket specialised products for which no standard prices ever exist, it is extremely difficult motivating executives to collude in order to mitigate the risks of unpredictable sales levels and prices -- in these cases such collusion is prosecuted. Antitrust law therefore picks at the edges of the problems of market power, whilst entirely ignoring the total dominance of the entire industrial system by oligopoly. In so doing it serves better to maintain the illusion that the sovereignty of the market is preserved than to actually prevent the accumulation or continuation of market power: "They do not preserve the market. They preserve rather the illusion of the market."[16] | There is an equal contradiction in the present antitrust law. It forbids combination by merger and explicit collusion in price-fixing. It permits large firms to continue to dominate their markets and to increase in size through investment and growth in sales, and implicit collusion in price-fixing. A firm may grow to have a fifty per cent share in its market, but two firms may not combine to form fifteen per cent. In most cases explicit collusion could not make price-fixing any more effective or binding. In these markets it is practised with immunity. In a few, particularly markets for big-ticket specialised products for which no standard prices ever exist, it is extremely difficult motivating executives to collude in order to mitigate the risks of unpredictable sales levels and prices -- in these cases such collusion is prosecuted. Antitrust law therefore picks at the edges of the problems of market power, whilst entirely ignoring the total dominance of the entire industrial system by oligopoly. In so doing it serves better to maintain the illusion that the sovereignty of the market is preserved than to actually prevent the accumulation or continuation of market power: "They do not preserve the market. They preserve rather the illusion of the market."((p202)) |
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| The main contradiction between a price theory that condemns oligopoly and the consistent efficiency and gains of an industrial system based on this structure can be resolved through a better understanding of the role of prices in industrial planning. | The main contradiction between a price theory that condemns oligopoly and the consistent efficiency and gains of an industrial system based on this structure can be resolved through a better understanding of the role of prices in industrial planning. |
| The industrial system relies on its control of prices in the markets in which it operates to make long-term planning possible, by guaranteeing an acceptable level of revenue. But clearly, the volume of products each corporation is able to sell at its fixed price is equally important to the security of this revenue. It would be inconsistent of corporations to invest effort in securing stable prices and do nothing to manage consumer demand. | The industrial system relies on its control of prices in the markets in which it operates to make long-term planning possible, by guaranteeing an acceptable level of revenue. But clearly, the volume of products each corporation is able to sell at its fixed price is equally important to the security of this revenue. It would be inconsistent of corporations to invest effort in securing stable prices and do nothing to manage consumer demand. |
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| In fact, demand is very actively managed. This function of the firm covers not only advertising functions -- itself accounting for $20 billion[17] a year -- but also for many other general functions of management and production: devising a sales strategy, devising a product or features of a product around which a sales strategy can be built, product design, and model change in order to provide strong selling points. | In fact, demand is very actively managed. This function of the firm covers not only advertising functions -- itself accounting for $20 billion((Theodore Levitt, "The Morality of Advertising", Harvard Business Review, July-August 1970.)) a year -- but also for many other general functions of management and production: devising a sales strategy, devising a product or features of a product around which a sales strategy can be built, product design, and model change in order to provide strong selling points. |
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| The purpose of demand management is to ensure that a sufficient quantity of product is bought at the controlled price. Not all advertising is devoted to this end, which is of importance to avoid overstatement. There are forms of advertising such as classified adverts whose purpose are merely to inform an otherwise ignorant consumer of the existence and price of a product for sale. This does not, of course, imply that the role of all advertising is merely to provide information about products. "[A]s I have noted on earlier occasions, only a gravely retarded citizen can need to be told that the American Tobacco Company has cigarettes for sale."[18] | The purpose of demand management is to ensure that a sufficient quantity of product is bought at the controlled price. Not all advertising is devoted to this end, which is of importance to avoid overstatement. There are forms of advertising such as classified adverts whose purpose are merely to inform an otherwise ignorant consumer of the existence and price of a product for sale. This does not, of course, imply that the role of all advertising is merely to provide information about products. "[A]s I have noted on earlier occasions, only a gravely retarded citizen can need to be told that the American Tobacco Company has cigarettes for sale."((p208.)) |
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| Economic theory associates advertising with oligopoly -- here it is a wasteful zero-sum game in which firms compete with one another for market share because of their inability to compete on price. "These large advertising budgets, like heavy armaments, largely cancel each other out. Not even the oligopolists benefit from them."[19] This is nonsense. This advertising effort shifts demand to the industry from other industries, it shifts the overall pattern of demand such that more goods of this class are demanded than would otherwise be so. In doing so, it shifts a part of the ultimate decision -- the 'sovereignty' -- as to what is to be purchased and therefore produced in the economy from the consumer to the corporation. It also serves to stabilise the demand faced by each individual firm -- advertising effort will be redoubled in the firm with stagnating or falling sales, whilst in the successful firm efforts to create new campaigns or redesign their products will be more lax. In this way, the share of demand between different firms will be, to some extent at least, self-rectifying, making planning easier. Again, in order to avoid overstatement there will be exceptions -- occasional products which the consumer will not accept not matter how large the marketing effort. The novelty of these cases serves to illustrate the point -- this process is imperfect but nevertheless strong and reasonably reliable and is not disproved by its exceptions. | Economic theory associates advertising with oligopoly -- here it is a wasteful zero-sum game in which firms compete with one another for market share because of their inability to compete on price. "These large advertising budgets, like heavy armaments, largely cancel each other out. Not even the oligopolists benefit from them."((Robert Dorfman, "The Price System", Hemel H: Prentice Hall, 1965, p102)) This is nonsense. This advertising effort shifts demand to the industry from other industries, it shifts the overall pattern of demand such that more goods of this class are demanded than would otherwise be so. In doing so, it shifts a part of the ultimate decision -- the 'sovereignty' -- as to what is to be purchased and therefore produced in the economy from the consumer to the corporation. It also serves to stabilise the demand faced by each individual firm -- advertising effort will be redoubled in the firm with stagnating or falling sales, whilst in the successful firm efforts to create new campaigns or redesign their products will be more lax. In this way, the share of demand between different firms will be, to some extent at least, self-rectifying, making planning easier. Again, in order to avoid overstatement there will be exceptions -- occasional products which the consumer will not accept not matter how large the marketing effort. The novelty of these cases serves to illustrate the point -- this process is imperfect but nevertheless strong and reasonably reliable and is not disproved by its exceptions. |
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| In recent times, those with lower levels of literacy have joined the class of individuals with excess money available to spend on satisfying psychic rather than physical wants. Thus it has been necessary to extend advertising methods from print advertisements which were previously sufficient to manage the demand of the minority of society who had a malleable demand to the remainder of the population -- radio and television advertising has filled this gap. It is now of great importance. "The industrial system is profoundly dependent on commercial television and could not exist in its present form without it."[20] | In recent times, those with lower levels of literacy have joined the class of individuals with excess money available to spend on satisfying psychic rather than physical wants. Thus it has been necessary to extend advertising methods from print advertisements which were previously sufficient to manage the demand of the minority of society who had a malleable demand to the remainder of the population -- radio and television advertising has filled this gap. It is now of great importance. "The industrial system is profoundly dependent on commercial television and could not exist in its present form without it."((p213.)) |
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| The management of demand is a mass phenomenon rather than an individual one, and is relatively subtle. It is perfectly possible for an individual to contract out of its influence, and this is often used as proof that it cannot possibly exist: "I know it is not true of me, and I do not fancy myself cleverer than the next man in this regard."[21] Whilst it is true that some people do not watch television, and that nobody is forced to watch, the fact remains that the majority do. | The management of demand is a mass phenomenon rather than an individual one, and is relatively subtle. It is perfectly possible for an individual to contract out of its influence, and this is often used as proof that it cannot possibly exist: "I know it is not true of me, and I do not fancy myself cleverer than the next man in this regard."((Robert Solow, "The New Industrial State or Son of Affluence", Public Interest, No 9, Autumn 1967.)) Whilst it is true that some people do not watch television, and that nobody is forced to watch, the fact remains that the majority do. |
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| Much of the conventional wisdom lives or dies on this point. If demand does not arise autonomously from consumers' inner desires, but rather is created through a complex sociological process in which both consumers and producers have a measure of influence, then the free operation of the industrial system comes under question. It cannot be defended on the basis that it is serving the 'higher purpose' of society's true needs. It cannot be protected from government interference or regulation on the basis that this will distort the discipline of the market. And indirectly the aggregate effect of advertising is to constantly reaffirm the value of goods, the value of production, the value of the industrial system and the value of the technostructure -- to place material production at the top of society's goals. | Much of the conventional wisdom lives or dies on this point. If demand does not arise autonomously from consumers' inner desires, but rather is created through a complex sociological process in which both consumers and producers have a measure of influence, then the free operation of the industrial system comes under question. It cannot be defended on the basis that it is serving the 'higher purpose' of society's true needs. It cannot be protected from government interference or regulation on the basis that this will distort the discipline of the market. And indirectly the aggregate effect of advertising is to constantly reaffirm the value of goods, the value of production, the value of the industrial system and the value of the technostructure -- to place material production at the top of society's goals. |
| In the traditional view, market conditions (demand) are determined by the inherent desires of the consumer; the firm is forced to respond helplessly to those conditions. The consumer is sovereign, the firm subservient. Let this be known as the Accepted Sequence. | In the traditional view, market conditions (demand) are determined by the inherent desires of the consumer; the firm is forced to respond helplessly to those conditions. The consumer is sovereign, the firm subservient. Let this be known as the Accepted Sequence. |
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| The accepted sequence persists in the competitive markets outside of the industrial system. Within the industrial system, it provides only a partial explanation. There is a separate mechanism, by which corporate functionaries create and distort consumer preferences, as well as market prices, so that market demand is managed by corporations.[22] Let this latter be known as the Revised Sequence. | The accepted sequence persists in the competitive markets outside of the industrial system. Within the industrial system, it provides only a partial explanation. There is a separate mechanism, by which corporate functionaries create and distort consumer preferences, as well as market prices, so that market demand is managed by corporations.(("As a related technical point, indifference curves do not survive the revised sequence. The indifference map reflects, at any given time, the comparative effectiveness of the sales strategies behind the products in question. It will change as these change. The logic of the indifference curve requires that it be original with the individual whose preferences it describes." --p219.)) Let this latter be known as the Revised Sequence. |
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| >> I do not suggest that the revised sequence has replaced the accepted sequence...Within the industrial system the consumer can still reject persuasion. And, in consequence, through the market he and his fellows can force accommodation by the producer. But consumers, and the prices at which they buy, can also be managed. And they are. The accepted and revised sequences exist side by side in the manner of a reversible chemical reaction. --p217 | >> I do not suggest that the revised sequence has replaced the accepted sequence...Within the industrial system the consumer can still reject persuasion. And, in consequence, through the market he and his fellows can force accommodation by the producer. But consumers, and the prices at which they buy, can also be managed. And they are. The accepted and revised sequences exist side by side in the manner of a reversible chemical reaction. --p217 |
| ===== The Control of the Wage-Price Spiral ===== | ===== The Control of the Wage-Price Spiral ===== |
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| There are two influential conceptual bases for the mechanism by which persistent inflation becomes established. The only important one for the industrial system, and therefore the most important one for the industrial state, is 'cost-push inflation', or the 'wage-price spiral'. When the economy is near full employment and aggregate demand is strong, trade unions find themselves in a strong bargaining position. There are likely to be a few unfilled positions amongst blue-collar positions. Recruitment is difficult. In the event of a strike, the workforce cannot be replaced en masse. The unions therefore press for wage increases. The technostructure fear the unpredictable consequences of a strike. They recognise that wage increases will make recruitment for unfilled positions easier, and improve employee retention. Further, because the corporation is not profit maximising -- and as is accepted by all economists -- the technostructure knows that it can pass on increased wage costs to its customers through higher prices. Union arrangements are usually to some extent industry-wide -- all firms are likely to accept similar rises in wages and prices will rise uniformly across the industry, so no firm will lose out. "And, finally, the technostructure with which the decision resides, does not itself have to pay."[23] So, when aggregate demand is adequate, the technostructure will readily accept wage demands, passing on costs to consumers. The price index rises as a result, leading to a further round of wage claims in the course of time. Inflation persists. | There are two influential conceptual bases for the mechanism by which persistent inflation becomes established. The only important one for the industrial system, and therefore the most important one for the industrial state, is 'cost-push inflation', or the 'wage-price spiral'. When the economy is near full employment and aggregate demand is strong, trade unions find themselves in a strong bargaining position. There are likely to be a few unfilled positions amongst blue-collar positions. Recruitment is difficult. In the event of a strike, the workforce cannot be replaced en masse. The unions therefore press for wage increases. The technostructure fear the unpredictable consequences of a strike. They recognise that wage increases will make recruitment for unfilled positions easier, and improve employee retention. Further, because the corporation is not profit maximising -- and as is accepted by all economists -- the technostructure knows that it can pass on increased wage costs to its customers through higher prices. Union arrangements are usually to some extent industry-wide -- all firms are likely to accept similar rises in wages and prices will rise uniformly across the industry, so no firm will lose out. "And, finally, the technostructure with which the decision resides, does not itself have to pay."((p252.)) So, when aggregate demand is adequate, the technostructure will readily accept wage demands, passing on costs to consumers. The price index rises as a result, leading to a further round of wage claims in the course of time. Inflation persists. |
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| Outside of the industrial system the situation is different: here the concept of 'demand-pull inflation' is more appropriate. The entrepreneurial firm already maximises profits -- wage demands cannot be passed on to the consumer and must be paid for out of the entrepreneur's earnings: "Again there is the special poignancy in paying when the individual has himself to pay."[24] Wage claims will be fiercely resisted. Prices will only rise when aggregate demand outstrips the industry's ability to supply, when profit maximisation leads the entrepreneur to increase prices. This will not happen until aggregate demand is excessive rather than sufficient, although the definition of these points is somewhat hazy. | Outside of the industrial system the situation is different: here the concept of 'demand-pull inflation' is more appropriate. The entrepreneurial firm already maximises profits -- wage demands cannot be passed on to the consumer and must be paid for out of the entrepreneur's earnings: "Again there is the special poignancy in paying when the individual has himself to pay."((p251.)) Wage claims will be fiercely resisted. Prices will only rise when aggregate demand outstrips the industry's ability to supply, when profit maximisation leads the entrepreneur to increase prices. This will not happen until aggregate demand is excessive rather than sufficient, although the definition of these points is somewhat hazy. |
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| The point is that the wage-price spiral begins before the economy reaches capacity -- it can only be avoided by reducing demand so much that an unacceptable level of unemployment results. Persistent inflation and significant unemployment are both unacceptable. The only solution to this problem is state control of wages and prices within the industrial system. This has been highly effective whenever it has been tried -- in the US to a greater or lesser extent since the Second World War (rigid controls from 1941 through to the end of the war, then again during Korea, followed by informal but significant pressure under Kennedy and a sudden and rather embarrassing return to formal controls previously denounced as little short of un-American under Nixon[25]) -- but has somehow never convinced economists of its effectiveness. | The point is that the wage-price spiral begins before the economy reaches capacity -- it can only be avoided by reducing demand so much that an unacceptable level of unemployment results. Persistent inflation and significant unemployment are both unacceptable. The only solution to this problem is state control of wages and prices within the industrial system. This has been highly effective whenever it has been tried -- in the US to a greater or lesser extent since the Second World War (rigid controls from 1941 through to the end of the war, then again during Korea, followed by informal but significant pressure under Kennedy and a sudden and rather embarrassing return to formal controls previously denounced as little short of un-American under Nixon(("[W]ith the advent of the Republican administration in 1969, their ideological weakness became for a time decisive. The Nixon economists were strongly committed to the antique market beliefs; they affirmed strongly their belief that they could combine stable prices with high employment without any direct intervention on wages and prices. Controls, voluntary or otherwise, were specifically eschewed. As frequently before, reality showed its power in opposition to ideological preference. While demand was curtailed and unemployment rose, prices continued to rise. Instead of combining high employment with stable prices, insufficient employment was predictably combined with wage-price inflation. After a year and a half -- in the summer of 1970 -- Mr Nixon's economic advisers were compelled to concede the role of the wage-price spiral and to plead for restraint." --p260.))) -- but has somehow never convinced economists of its effectiveness. |
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| >> For economists, as will be sufficiently evident, a massive intellectual vested interest was involved. As noted, nearly all teaching and technical discourse assumed markets win which producers sought to maximise their return. To admit of the need for price or wage control was to admit of the inadequacy o this system and the associated theoretical apparatus...Instead of revealing to students by precise and rational diagrams the prices that would maximise profits for a producer, it would be necessary to consider what price a bureaucrat might believe consistent with wage and price stability. Economist would be reduced to the level of political science. Truth has its obligations to dignity. --p254 | >> For economists, as will be sufficiently evident, a massive intellectual vested interest was involved. As noted, nearly all teaching and technical discourse assumed markets win which producers sought to maximise their return. To admit of the need for price or wage control was to admit of the inadequacy o this system and the associated theoretical apparatus...Instead of revealing to students by precise and rational diagrams the prices that would maximise profits for a producer, it would be necessary to consider what price a bureaucrat might believe consistent with wage and price stability. Economist would be reduced to the level of political science. Truth has its obligations to dignity. --p254 |
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| - The shift in power from the entrepreneur to the technostructure, as previously mentioned, means that those deciding whether to accept wage demands are no longer those who will pay the bill. The urgency of undermining or destroying the union felt by the entrepreneur is not felt by the technostructure -- the union poses a threat to planning through the risk of striking rather than a threat to pecuniary reward through seizing their profits. Thus it is in the interests of the technostructure to pursue more docile relations and assent to more generous wage agreements. Moreover, increased costs can be passed on to consumers, especially when wage agreements are industry-wide, signalling equal price increases for all firms simultaneously. | - The shift in power from the entrepreneur to the technostructure, as previously mentioned, means that those deciding whether to accept wage demands are no longer those who will pay the bill. The urgency of undermining or destroying the union felt by the entrepreneur is not felt by the technostructure -- the union poses a threat to planning through the risk of striking rather than a threat to pecuniary reward through seizing their profits. Thus it is in the interests of the technostructure to pursue more docile relations and assent to more generous wage agreements. Moreover, increased costs can be passed on to consumers, especially when wage agreements are industry-wide, signalling equal price increases for all firms simultaneously. |
| - Technological advance reduces the number of workers within reach of the union, shifting employees in large number into white collar positions who tend to identify more with management than with unions.[26] | - Technological advance reduces the number of workers within reach of the union, shifting employees in large number into white collar positions who tend to identify more with management than with unions.(("We have here another example of the way the industrial system accommodates belief to its convenience. It has been the lurking conviction of quite a few unions that technical change is an instrument adverse to their interests and thus to be resisted. This attitude has been uniformly deplored as wrong and regressive and no more fitting of civilised advocacy than sodomy, self-flagellation and the refusal to use soap. All right-thinking people should accept machines and participate in the general fruits of progress. In fact, the instinct of the unions was sound. And, from the point of view of those immediately involved, the tactic of resistance may also have been sound. Over a longer period, of course, the resisting unions have been outflanked by competitive change -- as the anthracite miners were outflanked by oil and the railroad brotherhood by automobiles, trucks and planes." --p268)) |
| - The regulation of markets and aggregate demand as well as comparative affluence have reduced the dependence of the worker on the union. Where previously the worker had been unable to find another job because of high level of unemployment, management of aggregate demand has made this much easier. Consequently, where the union was previously the only mechanism by which he could solicit for better working conditions, and the only organisation that could protect him from the extreme privation of unemployment, now he is less dependent. He is much more able to find another job if he is dissatisfied and thus the problem of recruitment motivates firms to voluntarily improve conditions.[27] | - The regulation of markets and aggregate demand as well as comparative affluence have reduced the dependence of the worker on the union. Where previously the worker had been unable to find another job because of high level of unemployment, management of aggregate demand has made this much easier. Consequently, where the union was previously the only mechanism by which he could solicit for better working conditions, and the only organisation that could protect him from the extreme privation of unemployment, now he is less dependent. He is much more able to find another job if he is dissatisfied and thus the problem of recruitment motivates firms to voluntarily improve conditions.((The existence of a large pool of unemployed people who were willing and able to replace any industrial worker was a central feature of capitalist exploitation for Marx. "Relative surplus-population is...the pivot upon which the law of demand and supply of labour works. It confines the field of action of this law within the limits absolutely convenient...to the domination of capital." --"Capital", Ch 25. He also believed that full employment would be absolutely intolerable to the capitalist. "One imagines that Marx would have regarded a full employment policy, if successfully pursued over any length of time, as having radical implications for his system, the class struggle and the laws of capitalist accumulation." --p271.)) |
| - The imperatives of price and wage regulation place wage negotiation firmly within the remit of the state, and are ultimately likely to demand that wage increases progress in line with industry average improvements in productivity. | - The imperatives of price and wage regulation place wage negotiation firmly within the remit of the state, and are ultimately likely to demand that wage increases progress in line with industry average improvements in productivity. |
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| Although the original role of the union is waning in the industrial system and the numbers of unionised employees is clearly in decline, new and useful roles for the union have emerged in this context. In some ways, unions in the industrial system are becoming more similar to those in the Soviet system -- in which unions must be allowed to persist as a symbol of worker power but cannot be allowed to interfere with workers' identification with the goals of the firm. The union has emerged as an infrastructure through which grievances about the fairness of an increasingly complex pay structure are aired and settled. In some cases unions have supported the adoption of new technology, and have constructively negotiated settlements for reducing employment as part of these adjustments. They now provide a convenient voice to proclaim the needs of the technostructure: whereas it is uncomfortable for the technostructure to demand increased defence spending for its own enrichment and security, it is more acceptable for unions to advocate such spending to protect jobs and the wellbeing of the community in which most workers are employed. "On support for the Vietnam war and on spending for highly technical weapons some union leaders, in recent years, have been far less inhibited than management."[28] | Although the original role of the union is waning in the industrial system and the numbers of unionised employees is clearly in decline, new and useful roles for the union have emerged in this context. In some ways, unions in the industrial system are becoming more similar to those in the Soviet system -- in which unions must be allowed to persist as a symbol of worker power but cannot be allowed to interfere with workers' identification with the goals of the firm. The union has emerged as an infrastructure through which grievances about the fairness of an increasingly complex pay structure are aired and settled. In some cases unions have supported the adoption of new technology, and have constructively negotiated settlements for reducing employment as part of these adjustments. They now provide a convenient voice to proclaim the needs of the technostructure: whereas it is uncomfortable for the technostructure to demand increased defence spending for its own enrichment and security, it is more acceptable for unions to advocate such spending to protect jobs and the wellbeing of the community in which most workers are employed. "On support for the Vietnam war and on spending for highly technical weapons some union leaders, in recent years, have been far less inhibited than management."((p279.)) |
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| Finally, the union is capable of delivering industry-wide wage agreements, and is a viable mechanism by which its members can be induced to accept such agreements -- in other words, by which wages can be reliably controlled. This reduces the threat of one firm within an industry managing to reduce wages beneath those of its competitors and thereby underselling the industry. It also makes the state's problem of agreeing wage controls to prevent inflation far more manageable. | Finally, the union is capable of delivering industry-wide wage agreements, and is a viable mechanism by which its members can be induced to accept such agreements -- in other words, by which wages can be reliably controlled. This reduces the threat of one firm within an industry managing to reduce wages beneath those of its competitors and thereby underselling the industry. It also makes the state's problem of agreeing wage controls to prevent inflation far more manageable. |
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| ===== The Educational and Scientific Estate[29] ===== | ===== The Educational and Scientific Estate(("There is no good term for this large group which is associated with education and scientific research apart from that undertaken by the technostructure. In political discourse they are grouped with writers and poets and referred to either as intellectuals or eggheads. The first term is too restrictive in its connotations and if not too restrictive, too pretentious. The second is insufficiently solemn." --p283.)) ===== |
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| The educational estate has grown fortyfold over the past 80 years.[30] This growth has responded to the importance of trained talent as the most scarce vital resource in the industrial society. | The educational estate has grown fortyfold over the past 80 years.((College and university teachers numbered 24,000 in 1900 and are expected to number 920,000 in 1977. Growth measured by student numbers or expenditure is similarly meteoric. See p285.)) This growth has responded to the importance of trained talent as the most scarce vital resource in the industrial society. |
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| Prior to the significance of the industrial system, the educational establishment was largely under the influence of the entrepreneur. Much of the money which sustained the few schools and colleges that existed came directly from rich benefactors, who believed in "the doctrine of financial paramountcy -- of the ultimate power of those who paid the bills", although this was never fully accepted in the academic community. Indeed, a significant tension always existed between the private sector who felt financial measures the uncontroversial measure of success and academics who, failing dismally by such measures, tried to assert goals that were "intellectually more demanding or aesthetically more refined".[31] This tension was complicated by academia's tendency to be the dominant source of social innovation -- a realm in which corporations have always been notably sterile. Whilst inconvenient views were often voluntarily muted or suppressed, nevertheless legislation and policy antithetical to the entrepreneurial enterprise originated in the universities: | Prior to the significance of the industrial system, the educational establishment was largely under the influence of the entrepreneur. Much of the money which sustained the few schools and colleges that existed came directly from rich benefactors, who believed in "the doctrine of financial paramountcy -- of the ultimate power of those who paid the bills", although this was never fully accepted in the academic community. Indeed, a significant tension always existed between the private sector who felt financial measures the uncontroversial measure of success and academics who, failing dismally by such measures, tried to assert goals that were "intellectually more demanding or aesthetically more refined".((p286.)) This tension was complicated by academia's tendency to be the dominant source of social innovation -- a realm in which corporations have always been notably sterile. Whilst inconvenient views were often voluntarily muted or suppressed, nevertheless legislation and policy antithetical to the entrepreneurial enterprise originated in the universities: |
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| >> Laws against monopoly, regulating access to the capital markets, n support of a wide range of welfare measures, in support of progressive taxation and on behalf of unions, owed much to such origins. --p288 | >> Laws against monopoly, regulating access to the capital markets, n support of a wide range of welfare measures, in support of progressive taxation and on behalf of unions, owed much to such origins. --p288 |
| >> Proposals for reform, by contrast, begin as seemingly eccentric and implausible suggestions. Gradually they gain adherents; in time they emerge as grave needs; and then they become fundamental human rights. It is not so easy to attribute power to those who set this process in motion. --p288 | >> Proposals for reform, by contrast, begin as seemingly eccentric and implausible suggestions. Gradually they gain adherents; in time they emerge as grave needs; and then they become fundamental human rights. It is not so easy to attribute power to those who set this process in motion. --p288 |
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| The needs of the technostructure and the modern educational estate are much more closely aligned. The technostructure is dependent on the educational estate not only for a constant supply of talent, but for information about current technological innovation. There are more acute risks associated with direct criticism of academics. Moreover, academic ideas are not as threatening to the technostructure as they were to the entrepreneur. The costs of "improvements in medical care, guaranteed incomes for the poor, protection or salvaging of the environment, regeneration of slums" can be passed on to either consumers or shareholders, and the burden of coping with regulation can be passed on to professional lawyers, accountants and industrial relations specialists where once these burdens fell squarely on the entrepreneur. "The burden of regulation like that of taxation is appreciably lessened by having it fall on someone else."[32] Some recent developments that have come from academia have proved invaluable to the needs of the technostructure -- particularly the regulation of aggregate demand and the more nascent attempts to control prices and wages.[33] | The needs of the technostructure and the modern educational estate are much more closely aligned. The technostructure is dependent on the educational estate not only for a constant supply of talent, but for information about current technological innovation. There are more acute risks associated with direct criticism of academics. Moreover, academic ideas are not as threatening to the technostructure as they were to the entrepreneur. The costs of "improvements in medical care, guaranteed incomes for the poor, protection or salvaging of the environment, regeneration of slums" can be passed on to either consumers or shareholders, and the burden of coping with regulation can be passed on to professional lawyers, accountants and industrial relations specialists where once these burdens fell squarely on the entrepreneur. "The burden of regulation like that of taxation is appreciably lessened by having it fall on someone else."((p290.)) Some recent developments that have come from academia have proved invaluable to the needs of the technostructure -- particularly the regulation of aggregate demand and the more nascent attempts to control prices and wages.((Further: "[W]hat may be called reputable social science no longer has overtones of revolution. Rather it denies the likelihood, even the possibility. This too is the result of the intricate web of change which we are here unravelling. The revolution, as delineated by Marx, assumed the progressive immiseration of the working class. Instead of the expected impoverishment there has been increasing affluence. Marxists, themselves, no longer deny this or convincingly suggest that worker well-being is illusory or transitory. The revolution was to be catalysed by the capitalist crisis -- the apocalyptic depression which would bring an entrepreneurial already attenuated structure down in ruins. But the industrial system has, as an integral requirement, an arrangement fore regulating aggregate demand which, while permitting it to plan, gives promise, with minimal management, of preventing, or at least mitigating, depression. So, the danger of an apocalyptic crisis seems more remote. The trade union, militantly expressing the power of the worker, was to be the cutting edge of the revolution. But the industrial system mellows and even absorbs the union. Most important, perhaps, of all, the revolution has occurred in some countries. And there the lineaments of industrialisation -- planning, large producing organisations, the resulting discipline, the measures of success by economic growth -- no longer seem as different as they did in the fears and hopes of half a century ago. Everything on which the revolution seemed to depend, and even the revolution itself, has disintegrated." --p290-1.)) |
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| The question remains to what extent the educational estate has reconciled its goals to those of the industrial system. There is no single answer as the educational estate is importantly heterogeneous, but there is a trend for the degree of reconciliation to vary across subjects. "[E]conomics, as a discipline, has extensively and rather subtly accommodated itself to the needs of the industrial system."[34] So, to a significant but lesser extent, have the hard sciences and engineering -- who often work closely with the technostructure and often receives money from them. Much less so the classics, humanities and some social sciences and a natural tension has grown up between the two cultures. | The question remains to what extent the educational estate has reconciled its goals to those of the industrial system. There is no single answer as the educational estate is importantly heterogeneous, but there is a trend for the degree of reconciliation to vary across subjects. "[E]conomics, as a discipline, has extensively and rather subtly accommodated itself to the needs of the industrial system."((p292.)) So, to a significant but lesser extent, have the hard sciences and engineering -- who often work closely with the technostructure and often receives money from them. Much less so the classics, humanities and some social sciences and a natural tension has grown up between the two cultures. |
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| Despite this reconciliation, there remain three main points of conflict between the educational estate and technostructure: | Despite this reconciliation, there remain three main points of conflict between the educational estate and technostructure: |
| ===== The Industrial System and the State ===== | ===== The Industrial System and the State ===== |
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| The relationship between the entrepreneurial firm and the state, like all relationships of the entrepreneurial firm, primarily pecuniary and generally zero-sum. By purchasing influence the entrepreneur could gain various profitable concessions: protection from foreign competition, railway and public utility franchises, licenses to export mineral rights and other natural resources, exception or mitigation of taxes and armed support against some of the excesses of workers' ambitions. Equally, the entrepreneur had every reason to fear state power, particularly in the form of taxation and regulation. Entrepreneurial influence over government was direct, pecuniary and very great -- to the extent that business was perceived to have bought government. Influence came in the form of purchased votes and legislators. Large corporations dominated the states in which they were based: "California of the Southern Pacific, Montana of Anaconda, Pennsylvania or the steel and coal companies, Michigan of the automobile companies".[35] | The relationship between the entrepreneurial firm and the state, like all relationships of the entrepreneurial firm, primarily pecuniary and generally zero-sum. By purchasing influence the entrepreneur could gain various profitable concessions: protection from foreign competition, railway and public utility franchises, licenses to export mineral rights and other natural resources, exception or mitigation of taxes and armed support against some of the excesses of workers' ambitions. Equally, the entrepreneur had every reason to fear state power, particularly in the form of taxation and regulation. Entrepreneurial influence over government was direct, pecuniary and very great -- to the extent that business was perceived to have bought government. Influence came in the form of purchased votes and legislators. Large corporations dominated the states in which they were based: "California of the Southern Pacific, Montana of Anaconda, Pennsylvania or the steel and coal companies, Michigan of the automobile companies".((p300.)) |
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| During the 1930s, there was a wide perception that this relationship -- of business dominating the state -- was being reversed. It was largely blamed on the unions who, with the support of the intellectual elite, were enlarging the power of the state by encouraging it to adopt roles in the management of aggregate demand and greater support for working people. In fact the enlargement of the state that was occurring very much met the needs of the emerging industrial system. | During the 1930s, there was a wide perception that this relationship -- of business dominating the state -- was being reversed. It was largely blamed on the unions who, with the support of the intellectual elite, were enlarging the power of the state by encouraging it to adopt roles in the management of aggregate demand and greater support for working people. In fact the enlargement of the state that was occurring very much met the needs of the emerging industrial system. |
| ===== A Further Summary ===== | ===== A Further Summary ===== |
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| Poverty remains in the US as in other industrialised countries, but not within the industrial system, which has also greatly reduced the burden of human toil. "Only those who have never experienced hard and tedious labour, long continued, can be wholly indifferent to its elimination."[36] The economic system no longer serves man's "original and sovereign desires" -- the industrial system not only accommodates to men's needs, but also accommodates men to its needs. This is not peripheral, but a fundamental requirement of the industrial system. This control ensures that men do not work less as more of their wants are satisfied. Increased production remains the primary goal of society, and thus the industrial system remains of paramount importance. | Poverty remains in the US as in other industrialised countries, but not within the industrial system, which has also greatly reduced the burden of human toil. "Only those who have never experienced hard and tedious labour, long continued, can be wholly indifferent to its elimination."((p317.)) The economic system no longer serves man's "original and sovereign desires" -- the industrial system not only accommodates to men's needs, but also accommodates men to its needs. This is not peripheral, but a fundamental requirement of the industrial system. This control ensures that men do not work less as more of their wants are satisfied. Increased production remains the primary goal of society, and thus the industrial system remains of paramount importance. |
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| >> The management to which we are subject is not onerous. It works not on the body but on the mind. I first wins acquiescence or belief; action is in response to this mental conditioning and thus devoid f any sense of compulsion. It is not that we are required to have a newly configured automobile or a novel reverse-action laxative; it is because we believe that we must have them. It is open to anyone who can resist belief to contract out of this control. But we are no less managed because we are not physically compelled. On the contrary, though this is poorly understood, physical compulsion would have a far lower order of efficiency. --p318 | >> The management to which we are subject is not onerous. It works not on the body but on the mind. I first wins acquiescence or belief; action is in response to this mental conditioning and thus devoid f any sense of compulsion. It is not that we are required to have a newly configured automobile or a novel reverse-action laxative; it is because we believe that we must have them. It is open to anyone who can resist belief to contract out of this control. But we are no less managed because we are not physically compelled. On the contrary, though this is poorly understood, physical compulsion would have a far lower order of efficiency. --p318 |
| >> Everyone who wins a positive score in an intelligence test recognises that the selling of goods -- the management of demand for particular products -- requires well-considered mendacity. --p323 | >> Everyone who wins a positive score in an intelligence test recognises that the selling of goods -- the management of demand for particular products -- requires well-considered mendacity. --p323 |
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| Nobody believes advertisers' claims about ordinary products, yet this fails to make advertising ineffective. In contrast, the fantasies that are employed in order to advertise military products to the governmental customer are believed with fervour, including those purveying these fantasies although the fantasies are no less contrivances convenient to the industrial system. The industrial system requires a large state market for high-technology waste and the customary image which justifies this expenditures has long been the Cold War. Naturally the origins of the Cold War imagery are real, but it has been groomed to accommodate the needs of the industrial system. It is "relentless, implacable, permanent, but ultimately benign".[37] Despite similarities in the two societies' accommodations to the imperatives of planning, in the Soviet system the management of the individual is more direct and subject to compulsion. The incompatibility of the two systems and the evangelism that accompanies their differences lead to military competition. "All features of this competition are closely congruent with need."[38] The conflict is permanent, avoiding the annoying danger in other forms of warfare for a cessation of hostilities to reduce military production -- "A war without fighting neatly obviates the danger that fighting will stop."[39] Obsolescence replaces battlefield attrition. Any agreement to arrest the competition is universally agreed to be far more dangerous than the competition itself. Without the usual large numbers of the poor fighting and dying, the Cold War is not resisted by the working class as previous wars have tended to be. | Nobody believes advertisers' claims about ordinary products, yet this fails to make advertising ineffective. In contrast, the fantasies that are employed in order to advertise military products to the governmental customer are believed with fervour, including those purveying these fantasies although the fantasies are no less contrivances convenient to the industrial system. The industrial system requires a large state market for high-technology waste and the customary image which justifies this expenditures has long been the Cold War. Naturally the origins of the Cold War imagery are real, but it has been groomed to accommodate the needs of the industrial system. It is "relentless, implacable, permanent, but ultimately benign".((p326.)) Despite similarities in the two societies' accommodations to the imperatives of planning, in the Soviet system the management of the individual is more direct and subject to compulsion. The incompatibility of the two systems and the evangelism that accompanies their differences lead to military competition. "All features of this competition are closely congruent with need."((p327.)) The conflict is permanent, avoiding the annoying danger in other forms of warfare for a cessation of hostilities to reduce military production -- "A war without fighting neatly obviates the danger that fighting will stop."((p327.)) Obsolescence replaces battlefield attrition. Any agreement to arrest the competition is universally agreed to be far more dangerous than the competition itself. Without the usual large numbers of the poor fighting and dying, the Cold War is not resisted by the working class as previous wars have tended to be. |
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| >> Even a calculation that the competition may, at some point, lead to a total destruction of all life is not a definitive objection. Liberty, not material well-being, is involved. This is an ultimate value that cannot be compromised in the face of any threat. "I am confident that the vast majority of the American people would passionately reject...ignominious defeatism and, instead, proclaim: 'Rather dead than Red!'"[40] Thus the competition is protected from even the most adverse estimates of its outcome. --p328 | >> Even a calculation that the competition may, at some point, lead to a total destruction of all life is not a definitive objection. Liberty, not material well-being, is involved. This is an ultimate value that cannot be compromised in the face of any threat. "I am confident that the vast majority of the American people would passionately reject...ignominious defeatism and, instead, proclaim: 'Rather dead than Red!'"((Thomas Power, General, USAF Ret, 1964, "Design for Survival", New York: Coward, p69.)) Thus the competition is protected from even the most adverse estimates of its outcome. --p328 |
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| Granting a continuation of or slight increase to the military budget is amongst the easiest decisions a president can make.[41] | Granting a continuation of or slight increase to the military budget is amongst the easiest decisions a president can make.(("[A]n established tradition...holds that a bill to spend billions of dollars for the machinery of war must be rushed through the House and the Senate in a matter of hours, while a treaty to advance the cause of peace, or a programme to help the undeveloped nations...guarantee the rights of all our citizens, or...to advance the interests of the poor must be scrutinised and debated and amended and thrashed over for weeks and perhaps months." --Senator Gaylord Nelson, United States Senate, February 1964; quoted by Julius Duscha, 1965, "Arms, Money and Politics", New York: Ives Washburn, p2.)) |
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| It is difficult to believe that implacable conflict is inevitable between the two countries. Their economic systems have much in common, indeed the trend is of convergence. The notion that the arms competition is ultimately benign is similarly suspect. Negotiated disarmament seems plausible. Agreements are negotiated in good faith with communists on all other matters. | It is difficult to believe that implacable conflict is inevitable between the two countries. Their economic systems have much in common, indeed the trend is of convergence. The notion that the arms competition is ultimately benign is similarly suspect. Negotiated disarmament seems plausible. Agreements are negotiated in good faith with communists on all other matters. |
| >> To eliminate civilised life for all time in response to a short-run calculation that liberty might otherwise be endangered is also irrational. And those who would make such a decision are themselves strongly subordinate to a particular system of belief. They are not themselves free men. --p330 | >> To eliminate civilised life for all time in response to a short-run calculation that liberty might otherwise be endangered is also irrational. And those who would make such a decision are themselves strongly subordinate to a particular system of belief. They are not themselves free men. --p330 |
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| In confronting the dangers involved in the military competition of the Cold War, two changes are necessary: firstly to ensure that sceptical scrutiny of official belief is an important political function and secondly to replace the industrial system's need for support in the development of technology by some less dangerous means. In the past, scrutiny has been a product of conflict -- each party to the conflict scrutinised its opponent with vigour. The mature corporation has been able to break down much of this conflict, particularly that between unions and capital. It does not have as natural an enemy as the entrepreneur. However, the educational estate has been encouragingly resistant to the ideas and ideology of the industrial system. "In the last decade there has been a recurrent conflict between the university community and the intellectuals on the one hand and the State Department and foreign policy establishment on the other...this, on the whole, has been an encouraging development."[42] With its growing size and power, the educational and scientific estate now has the opportunity to take on this role in questioning the imagery and foreign policy which originates within the industrial system. "Nothing in our time is more important."[43] | In confronting the dangers involved in the military competition of the Cold War, two changes are necessary: firstly to ensure that sceptical scrutiny of official belief is an important political function and secondly to replace the industrial system's need for support in the development of technology by some less dangerous means. In the past, scrutiny has been a product of conflict -- each party to the conflict scrutinised its opponent with vigour. The mature corporation has been able to break down much of this conflict, particularly that between unions and capital. It does not have as natural an enemy as the entrepreneur. However, the educational estate has been encouragingly resistant to the ideas and ideology of the industrial system. "In the last decade there has been a recurrent conflict between the university community and the intellectuals on the one hand and the State Department and foreign policy establishment on the other...this, on the whole, has been an encouraging development."((p332.)) With its growing size and power, the educational and scientific estate now has the opportunity to take on this role in questioning the imagery and foreign policy which originates within the industrial system. "Nothing in our time is more important."((p333.)) |
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| >> In the field of international relations, especially since the onset of the Cold War, high public officials have invariably been more diligent in instructing other governments than their own. Though often cautious and deferential in their relations with the Congress, Secretaries of State have been bold and forthright in informing the Soviets of their error. The late John Foster Dulles rarely missed an opportunity to advise the Russians on the merits of liberty and the rule of law and the sanctity of freedom of speech. He was much more cautious as regards Senator Joseph McCarthy although the latter, on frequent occasions, attacked freedom of expression and due process and did not omit to concern himself with Mr Dulles' own Department. Mr Dean Rusk, a circumspect man in dealing with domestic critics, especially those who might charge undue liberalism in relations with China, showed contrasting boldness in telling the communist powers of their great and varied shortcomings. Indeed, it may be laid down as a rule of international relations that the lower the probability that advice will be taken, the more firmly it will be proffered. --p333 | >> In the field of international relations, especially since the onset of the Cold War, high public officials have invariably been more diligent in instructing other governments than their own. Though often cautious and deferential in their relations with the Congress, Secretaries of State have been bold and forthright in informing the Soviets of their error. The late John Foster Dulles rarely missed an opportunity to advise the Russians on the merits of liberty and the rule of law and the sanctity of freedom of speech. He was much more cautious as regards Senator Joseph McCarthy although the latter, on frequent occasions, attacked freedom of expression and due process and did not omit to concern himself with Mr Dulles' own Department. Mr Dean Rusk, a circumspect man in dealing with domestic critics, especially those who might charge undue liberalism in relations with China, showed contrasting boldness in telling the communist powers of their great and varied shortcomings. Indeed, it may be laid down as a rule of international relations that the lower the probability that advice will be taken, the more firmly it will be proffered. --p333 |
| >> That one must pause to affirm that beauty is worth the sacrifice of some increase in the Gross National Product shows how effectively our beliefs have been accommodated to the needs of the industrial system. --p345 | >> That one must pause to affirm that beauty is worth the sacrifice of some increase in the Gross National Product shows how effectively our beliefs have been accommodated to the needs of the industrial system. --p345 |
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| When urban spaces are managed by democratic governments they are usually rather ugly. "Although the world owes more to public architecture than to private, it owes more to the taste of talented despots...than to democrats."[44] The only outcome substantially worse than planning by a democratic authority is that created by no planning. Politicians generally deem their own tenure a success if they can leave office knowing that society is richer than when they arrived. Even the most incompetent succeed by that measure. A much more severe test would be whether they leave their country more beautiful than before. | When urban spaces are managed by democratic governments they are usually rather ugly. "Although the world owes more to public architecture than to private, it owes more to the taste of talented despots...than to democrats."((p347.)) The only outcome substantially worse than planning by a democratic authority is that created by no planning. Politicians generally deem their own tenure a success if they can leave office knowing that society is richer than when they arrived. Even the most incompetent succeed by that measure. A much more severe test would be whether they leave their country more beautiful than before. |
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| >> None in this country would have passed. The fact of universal failure is another reason for insisting on the importance of the aesthetic dimension. No one likes an examination which he surely flunks. But far more than the test of production, which is far too easy, the test of aesthetic achievement is the one that, one day, the progressive community will apply. --p348 | >> None in this country would have passed. The fact of universal failure is another reason for insisting on the importance of the aesthetic dimension. No one likes an examination which he surely flunks. But far more than the test of production, which is far too easy, the test of aesthetic achievement is the one that, one day, the progressive community will apply. --p348 |
| >> For I'm going to do nothing forever and ever. --Traditional Epitaph of an English Charwoman | >> For I'm going to do nothing forever and ever. --Traditional Epitaph of an English Charwoman |
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| One of the great promises of the industrial system has been the replacement of work with leisure. In the early stages of the industrial system, toil was dreary, repetitive and physically painful. It was also very long. It is perfectly natural that a labourer working an eight-four hour week to earn the barest living will choose to realise any improvement in productivity in increased leisure rather than income. This is no longer true. Over the last thirty years, working hours have remained constant whilst before-tax real income has doubled.[45] "On the evidence, one must conclude that, as their incomes rise, men will work longer hours and seek less leisure."[46] Although there are exceptions, work within the industrial system is no longer as painful or boring as that which preceded it, and it can no longer be assumed that work is less pleasant than not working -- "Presiding over the console that regulates the movements of billets through a steel mill may be as pleasant as sojourning with a connubial fishwife."[47] If leisure is to be voluntarily chosen over work, then two prerequisites must be satisfied: | One of the great promises of the industrial system has been the replacement of work with leisure. In the early stages of the industrial system, toil was dreary, repetitive and physically painful. It was also very long. It is perfectly natural that a labourer working an eight-four hour week to earn the barest living will choose to realise any improvement in productivity in increased leisure rather than income. This is no longer true. Over the last thirty years, working hours have remained constant whilst before-tax real income has doubled.(("In 1941 the average work week in manufacturing was 40.6 hours; in 1969 it was 40.6 hours. In between it was a shade lighter" --p357, citing the Economic Report of the President, 1970.)) "On the evidence, one must conclude that, as their incomes rise, men will work longer hours and seek less leisure."((p357.)) Although there are exceptions, work within the industrial system is no longer as painful or boring as that which preceded it, and it can no longer be assumed that work is less pleasant than not working -- "Presiding over the console that regulates the movements of billets through a steel mill may be as pleasant as sojourning with a connubial fishwife."((p359.)) If leisure is to be voluntarily chosen over work, then two prerequisites must be satisfied: |
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| - They must find the uses of leisure more interesting or rewarding than those of work, and | - They must find the uses of leisure more interesting or rewarding than those of work, and |
| >> Having become wholly habituated to group activity, he is now alone. It is not a beautifully scripted arrangement. Millions since the dawn of man have led a less inspired existence but never on comparable income. --p362 | >> Having become wholly habituated to group activity, he is now alone. It is not a beautifully scripted arrangement. Millions since the dawn of man have led a less inspired existence but never on comparable income. --p362 |
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| It is possible that a response is already visible. Business schools are losing their distinction, and failing to attract the most able students. Business courses and careers are increasingly held to be "excessively disciplined, damaging to individuality, not worth the pay, or dull."[48] | It is possible that a response is already visible. Business schools are losing their distinction, and failing to attract the most able students. Business courses and careers are increasingly held to be "excessively disciplined, damaging to individuality, not worth the pay, or dull."((p363.)) |
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| >> We reach an interesting if speculative result. Emancipation could be the salvation of the industrial system. Its discipline will be worse but only thus will it attract people who are sufficiently good. --p363 | >> We reach an interesting if speculative result. Emancipation could be the salvation of the industrial system. Its discipline will be worse but only thus will it attract people who are sufficiently good. --p363 |
| In the late nineteenth and early twentieth century, discussion of the future of capitalism is rife; the present system was assumed to be an unstable and developing state. Such discussion no longer continues. The industrial system in particular is assumed to have reached some natural zenith, to remain as it presently exists in perpetuity. This seems unlikely, but to consider the ongoing changes in the industrial system would invite unwelcome analysis of various aspects of its activity, not least the trend of convergence between the Soviet and Western economies. | In the late nineteenth and early twentieth century, discussion of the future of capitalism is rife; the present system was assumed to be an unstable and developing state. Such discussion no longer continues. The industrial system in particular is assumed to have reached some natural zenith, to remain as it presently exists in perpetuity. This seems unlikely, but to consider the ongoing changes in the industrial system would invite unwelcome analysis of various aspects of its activity, not least the trend of convergence between the Soviet and Western economies. |
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| It seems unlikely that the industrial system will be regarded as independent for much longer. It has already been described as the 'semi-nationalised' branch of the economy.[49] | It seems unlikely that the industrial system will be regarded as independent for much longer. It has already been described as the 'semi-nationalised' branch of the economy.((Murray Weidenbaum, "The Defence-Space Complex: Impact on Whom?", Challenge: The Magazine of Economic Affairs, April 1956. Professor Weidenbaum, formerly of Boeing, has been Assistant Secretary of the Treasury for economic policy under Nixon.)) |
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| >> Men will look back in amusement at the pretence that once caused people to refer to General Dynamics and North American Aviation and AT&T as private business. --p386 | >> Men will look back in amusement at the pretence that once caused people to refer to General Dynamics and North American Aviation and AT&T as private business. --p386 |
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| Once the industrial system is recognised as being in the penumbra of the state, it can no longer resist public goals on the basis of its claims to being regulated or controlled by the market. "There may well be danger in this association of public and economic power. But it is less if it is recognised."[50] | Once the industrial system is recognised as being in the penumbra of the state, it can no longer resist public goals on the basis of its claims to being regulated or controlled by the market. "There may well be danger in this association of public and economic power. But it is less if it is recognised."((p386.)) |
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| Two primary questions frequently asked of an economic system are: does it meet physical need and does it allow personal liberty? The industrial system certainly meets the first. Concerns regarding the implications of the close collaboration of public and economic power on personal liberty are sound. But it must be recognised that the danger is not of the all-powerful state seizing control of private business, but an organic process in which the industrial system has become gradually closer to the state bureaucracy quite willingly. Inherent in this process is a voluntary, even enthusiastic, abdication of their freedom. | Two primary questions frequently asked of an economic system are: does it meet physical need and does it allow personal liberty? The industrial system certainly meets the first. Concerns regarding the implications of the close collaboration of public and economic power on personal liberty are sound. But it must be recognised that the danger is not of the all-powerful state seizing control of private business, but an organic process in which the industrial system has become gradually closer to the state bureaucracy quite willingly. Inherent in this process is a voluntary, even enthusiastic, abdication of their freedom. |
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| >> The president of Republic Aviation is not much more likely in public to speak critically, or even candidly, of the Air Force than is the head of a Soviet combinat of the ministry to which he reports. No modern head of the Ford Motor Company will ever react with the same pristine vigour to the presumed foolishness of Washington as did its founder...Manners may be involved. But it would also be conceded that 'too much is at stake'.[51] --p389 | >> The president of Republic Aviation is not much more likely in public to speak critically, or even candidly, of the Air Force than is the head of a Soviet combinat of the ministry to which he reports. No modern head of the Ford Motor Company will ever react with the same pristine vigour to the presumed foolishness of Washington as did its founder...Manners may be involved. But it would also be conceded that 'too much is at stake'.((Further: "[I]t can be laid down as a rule that those who speak most of liberty are least inclined to use it. The high executive who speaks fulsomely of personal freedom carefully submits his speeches on the subject for review and elimination of controversial words, phrases and ideas, as befits a good organisation man. The general who tells his troops, and the world, that they are in the forefront of the fight for freedom is a man who has always submitted happily to army discipline. The pillar of the foreign policy establishment who adverts most feelingly to the values of the free world is the man who extravagantly admires the orthodoxy of his own views." --p390.)) --p389 |
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| The danger, instead, is that belief becomes subordinated to the industrial system -- that the goals of society reflect its needs too strongly. If we continue to hold the needs of the industrial system as the highest social goals then all other avenues of human endeavour will continue to be subordinated to it, and we will continue to be managed as consumers and as employees to fits its needs -- as will government policy and the educational establishment. If the industrial system is seen instead as a part -- and a diminishing part -- of life, then the danger is much less great. | The danger, instead, is that belief becomes subordinated to the industrial system -- that the goals of society reflect its needs too strongly. If we continue to hold the needs of the industrial system as the highest social goals then all other avenues of human endeavour will continue to be subordinated to it, and we will continue to be managed as consumers and as employees to fits its needs -- as will government policy and the educational establishment. If the industrial system is seen instead as a part -- and a diminishing part -- of life, then the danger is much less great. |
| >> We have seen wherein the chance for salvation lies. The industrial system, in contrast with its economic antecedents, is intellectually demanding. It brings into existence, to serve its intellectual and scientific needs, the community that, hopefully, will reject is monopoly of social purpose. --p391 | >> We have seen wherein the chance for salvation lies. The industrial system, in contrast with its economic antecedents, is intellectually demanding. It brings into existence, to serve its intellectual and scientific needs, the community that, hopefully, will reject is monopoly of social purpose. --p391 |
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| ====== Footnotes ====== | |
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| [1] p23. | |
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| [2] p51. | |
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| [3] p71. | |
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| [4] p74. | |
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| [5] p77. | |
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| [6] p96. | |
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| [7] p116. | |
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| [8] p144. | |
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| [9] James March and Herbert Simon, 1958, "Organisations", Chichester: Wiley | |
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| [10] p162. | |
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| [11] p180. | |
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| [12] p183. | |
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| [13] p183. | |
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| [14] p187. | |
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| [15] p186-7; in each case the largest four firms had at least 60 per cent of the market in 1963. | |
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| [16] p202 | |
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| [17] Theodore Levitt, "The Morality of Advertising", Harvard Business Review, July-August 1970. | |
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| [18] p208. | |
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| [19] Robert Dorfman, "The Price System", Hemel H: Prentice Hall, 1965, p102 | |
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| [20] p213. | |
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| [21] Robert Solow, "The New Industrial State or Son of Affluence", Public Interest, No 9, Autumn 1967. | |
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| [22] "As a related technical point, indifference curves do not survive the revised sequence. The indifference map reflects, at any given time, the comparative effectiveness of the sales strategies behind the products in question. It will change as these change. The logic of the indifference curve requires that it be original with the individual whose preferences it describes." --p219. | |
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| [23] p252. | |
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| [24] p251. | |
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| [25] "[W]ith the advent of the Republican administration in 1969, their ideological weakness became for a time decisive. The Nixon economists were strongly committed to the antique market beliefs; they affirmed strongly their belief that they could combine stable prices with high employment without any direct intervention on wages and prices. Controls, voluntary or otherwise, were specifically eschewed. As frequently before, reality showed its power in opposition to ideological preference. While demand was curtailed and unemployment rose, prices continued to rise. Instead of combining high employment with stable prices, insufficient employment was predictably combined with wage-price inflation. After a year and a half -- in the summer of 1970 -- Mr Nixon's economic advisers were compelled to concede the role of the wage-price spiral and to plead for restraint." --p260. | |
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| [26] "We have here another example of the way the industrial system accommodates belief to its convenience. It has been the lurking conviction of quite a few unions that technical change is an instrument adverse to their interests and thus to be resisted. This attitude has been uniformly deplored as wrong and regressive and no more fitting of civilised advocacy than sodomy, self-flagellation and the refusal to use soap. All right-thinking people should accept machines and participate in the general fruits of progress. In fact, the instinct of the unions was sound. And, from the point of view of those immediately involved, the tactic of resistance may also have been sound. Over a longer period, of course, the resisting unions have been outflanked by competitive change -- as the anthracite miners were outflanked by oil and the railroad brotherhood by automobiles, trucks and planes." --p268 | |
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| [27] The existence of a large pool of unemployed people who were willing and able to replace any industrial worker was a central feature of capitalist exploitation for Marx. "Relative surplus-population is...the pivot upon which the law of demand and supply of labour works. It confines the field of action of this law within the limits absolutely convenient...to the domination of capital." --"Capital", Ch 25. He also believed that full employment would be absolutely intolerable to the capitalist. "One imagines that Marx would have regarded a full employment policy, if successfully pursued over any length of time, as having radical implications for his system, the class struggle and the laws of capitalist accumulation." --p271. | |
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| [28] p279. | |
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| [29] "There is no good term for this large group which is associated with education and scientific research apart from that undertaken by the technostructure. In political discourse they are grouped with writers and poets and referred to either as intellectuals or eggheads. The first term is too restrictive in its connotations and if not too restrictive, too pretentious. The second is insufficiently solemn." --p283. | |
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| [30] College and university teachers numbered 24,000 in 1900 and are expected to number 920,000 in 1977. Growth measured by student numbers or expenditure is similarly meteoric. See p285. | |
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| [31] p286. | |
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| [32] p290. | |
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| [33] Further: "[W]hat may be called reputable social science no longer has overtones of revolution. Rather it denies the likelihood, even the possibility. This too is the result of the intricate web of change which we are here unravelling. The revolution, as delineated by Marx, assumed the progressive immiseration of the working class. Instead of the expected impoverishment there has been increasing affluence. Marxists, themselves, no longer deny this or convincingly suggest that worker well-being is illusory or transitory. The revolution was to be catalysed by the capitalist crisis -- the apocalyptic depression which would bring an entrepreneurial already attenuated structure down in ruins. But the industrial system has, as an integral requirement, an arrangement fore regulating aggregate demand which, while permitting it to plan, gives promise, with minimal management, of preventing, or at least mitigating, depression. So, the danger of an apocalyptic crisis seems more remote. The trade union, militantly expressing the power of the worker, was to be the cutting edge of the revolution. But the industrial system mellows and even absorbs the union. Most important, perhaps, of all, the revolution has occurred in some countries. And there the lineaments of industrialisation -- planning, large producing organisations, the resulting discipline, the measures of success by economic growth -- no longer seem as different as they did in the fears and hopes of half a century ago. Everything on which the revolution seemed to depend, and even the revolution itself, has disintegrated." --p290-1. | |
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| [34] p292. | |
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| [35] p300. | |
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| [36] p317. | |
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| [37] p326. | |
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| [38] p327. | |
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| [39] p327. | |
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| [40] Thomas Power, General, USAF Ret, 1964, "Design for Survival", New York: Coward, p69. | |
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| [41] "[A]n established tradition...holds that a bill to spend billions of dollars for the machinery of war must be rushed through the House and the Senate in a matter of hours, while a treaty to advance the cause of peace, or a programme to help the undeveloped nations...guarantee the rights of all our citizens, or...to advance the interests of the poor must be scrutinised and debated and amended and thrashed over for weeks and perhaps months." --Senator Gaylord Nelson, United States Senate, February 1964; quoted by Julius Duscha, 1965, "Arms, Money and Politics", New York: Ives Washburn, p2. | |
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| [42] p332. | |
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| [43] p333. | |
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| [44] p347. | |
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| [45] "In 1941 the average work week in manufacturing was 40.6 hours; in 1969 it was 40.6 hours. In between it was a shade lighter" --p357, citing the Economic Report of the President, 1970. | |
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| [46] p357. | |
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| [47] p359. | |
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| [48] p363. | |
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| [49] Murray Weidenbaum, "The Defence-Space Complex: Impact on Whom?", Challenge: The Magazine of Economic Affairs, April 1956. Professor Weidenbaum, formerly of Boeing, has been Assistant Secretary of the Treasury for economic policy under Nixon. | |
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| [50] p386. | |
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| [51] Further: "[I]t can be laid down as a rule that those who speak most of liberty are least inclined to use it. The high executive who speaks fulsomely of personal freedom carefully submits his speeches on the subject for review and elimination of controversial words, phrases and ideas, as befits a good organisation man. The general who tells his troops, and the world, that they are in the forefront of the fight for freedom is a man who has always submitted happily to army discipline. The pillar of the foreign policy establishment who adverts most feelingly to the values of the free world is the man who extravagantly admires the orthodoxy of his own views." --p390. | |
